Marks & Spencer has suffered a slump in full-year profits as boss Steve Rowe wrestles to transform the retailer’s fortunes.
The high street bellwether said pre-tax profits tumbled 63.9% to £176.4m during the 52 weeks to April 1, when compared with the 53-week period the previous year.
Before the impact of adjusted items, pre-tax profit fell 11% to £613.8m.
Group revenues inched up 0.6% to £10.6bn, although like-for-like sales fell 1.9% as its clothing and home division continued to struggle.
Like-for-like sales in the category fell 3.4% across the full year after a 5.9% decline in its fourth quarter.
Marks & Spencer’s new boss Rowe had seemingly delivered some green shoots of recovery over the crucial Christmas trading period with a 2.3% rise in like-for-like clothing and home sales, but its fourth quarter proved more testing.
Full-year revenues from its clothing and home arm fell 2.8%.
In contrast, Marks & Spencer’s food business grew sales 4.2% on a total basis, although like-for-likes were down 0.8% following a 2.1% drop during the fourth quarter.
The retailer said fourth-quarter sales across both categories were impacted by the timing of the December sale, which was included in its third quarter, and the later Easter, which fell outside the reporting period.
M&S said it expected those factors to have sparked a 3.8% drop in clothing and home revenues and a 1.9% drop in total food sales during the final quarter of its financial year.
Despite its struggles, M&S hailed “progress” against its strategy following Rowe’s first full year at the helm.
The retailer said it now has “a clear view” of what its customers expect and has reshaped its clothing and home proposition with a “more consistent colour palette”, 10% fewer lines, reduced promotional activity and lower, regular prices.
M&S said that drove growth in gross margin of 105 basis points, while full-price sales grew 2.7% across the year.
“As we anticipated, the planned restructuring of M&S has come with a cost and has impacted profits, but the business is still strongly cash generative”
Earlier this month, M&S drafted in Halfords boss Jill McDonald to head up the embattled division, while former Asda boss Archie Norman is also joining as chairman to beef up the high street giant’s turnaround bid.
Rowe said: “We achieved a huge amount in the year and whilst there is still much to do, I am pleased with our progress and we remain on track.
“As we have made improvements to our clothing and home product and proposition, our customers have noticed; we are starting to stabilise market share and importantly have seen full-price market share growth, as we removed excessive discounting.
He added: “As we anticipated, the planned restructuring of M&S has come with a cost and has impacted profits, but the business is still strongly cash generative and we reduced our net debt.
“Looking ahead, we will continue our programme of self-help in a tough trading environment. We remain committed to delivering for our customers and shareholders as we build sustainable foundations for the future.”
M&S said it expected a space decline of between 1% and 2% in clothing and home during the 2017/18 financial year although it gave no forecasts on sales or profits.
In comparison, trading space in food will increase by around 7%, weighted towards the end of the financial year, as it opens 90 Simply Food stores.
M&S also predicted a rise of up to 3.5% in costs within its UK business as a result of new space, cost inflation and the annualisation of investment in customer service.
However, it said this would be partly offset by head office restructuring efficiencies.